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11/28/95 BANK AMERICA NATIONAL TRUST AND SAVINGS

APPELLATE COURT OF ILLINOIS, THIRD DISTRICT


November 28, 1995

BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, PLAINTIFF
v.
ZEDD INVESTMENTS, INC., ET AL., DEFENDANTS; INLAND ELECTRIC CORPORATION, AN ILLINOIS CORPORATION, COUNTER-PLAINTIFF-APPELLANT, V. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, ET AL., COUNTER-DEFENDANTS-APPELLEES.

Appeal from the Circuit Court for the 12th Judicial Circuit. Will County, Illinois. No. 91 CH 16566 (91 CH 9459 & 89 CH 738 - Consolidated). Honorable Thomas Ewert Judge, Presiding.

Released for Publication January 10, 1996. Petition for Leave to Appeal Denied April 3, 1996.

Honorable Peg Breslin, Justice, Honorable William E. Holdridge, Justice, Honorable Kent Slater, Justice, Justice Breslin delivered the opinion of the court: Holdridge and Slater, JJ., concur.

The opinion of the court was delivered by: Breslin

The Honorable Justice BRESLIN delivered the opinion of the court:

The counter-plaintiff, Inland Electric Corporation (Inland), filed a complaint for judgment and foreclosure in relation to mechanics liens it filed against several individual homeowners, their mortgagees, and the Bank of America (hereafter referred to collectively as counter-defendants). The trial court granted summary judgment to the counter-defendants on the grounds that Inland committed constructive fraud by filing multiple liens which misrepresented the amounts it was owed. Inland appeals. We hold that lien claims should be defeated on the basis of constructive fraud where a lien claimant files multiple liens that create the appearance of an encumbrance on the property which is substantially greater than the amount the claimant is owed. We therefore affirm.

In May 1989, Inland entered into two contracts with Cenvill Illinois Corporation (Cenvill), the owner and developer of the Carillon residential subdivision in Plainfield, to perform electrical work in the subdivision. One of the contracts covered work to be performed on townhomes and the other covered work to be performed on single family homes. Inland also contracted with Cenvill in June 1990 to perform additional work in the subdivision.

In April 1991, Inland filed sixty individual mechanics liens against residences in the subdivision (April liens). Each lien specified the value of work Inland performed for a specific lot; the total amount exceeded $122,000. Inland listed June 26, 1990 as the date of the contract that formed the basis for each of the liens and listed dates for the completion of the work ranging from December 20, 1990 to April 18, 1991. Cenvill owned sixteen of these lots and had previously sold forty-four others to individual purchasers.

In July 1991, Inland filed a blanket lien against all of the property in the subdivision (July lien). The lien claimed that Inland was owed $138,633.07, exclusive of interest. Although Inland based this lien on the May 1989 contract for work on townhomes, the lien stated that Inland performed work on both townhomes and single family homes. Inland listed April 13, 1991 as the completion date of the work.

Finally, in August 1991, Inland filed two more blanket liens covering only those parcels that were still owned by Cenvill (August liens). One lien stated that $26,069.04 was owed for work performed pursuant to the contract for single family homes; the other stated that $121,766.37 was due for work performed pursuant to the townhome contract. Both liens listed April 13, 1991 as the completion date of the work. All of the land covered by the August liens was also covered by the April or July liens.

Inland then brought this action against the counter-defendants, seeking a judgment and foreclosure on all of the liens. The total amount claimed in these liens exceeded $400,000. The counter-defendants filed a motion for summary judgment. Attached to this motion was a transcript of the deposition of Inland's president, Edward Mattox, in which he stated that the total outstanding balance on all of Inland's work in the subdivision, exclusive of interest, was $138,633.07.

The trial court found that Inland had committed constructive fraud by filing multiple liens which misrepresented the amount it was owed. Therefore, the court granted the counter-defendants' motion for summary judgment. Inland now appeals.

This court reviews summary judgment orders de novo. ( Farmers State Bank v. National Bank (1992), 230 Ill. App. 3d 881, 596 N.E.2d 173, 172 Ill. Dec. 894.) Summary judgment should be granted when the pleadings, depositions, admissions and affidavits show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 1994).

The Illinois Mechanics Lien Act provides that "no such lien shall be defeated to the proper amount thereof because of an error or overcharging on the part of any person claiming a lien there for under the Act, unless it shall be shown that such error or overcharge is made with intent to defraud ***." (770 ILCS 60/7 (West 1994).) Illinois courts have long held that this provision is intended to protect the honest lien claimant who makes a mistake rather than a dishonest claimant who knowingly makes a false statement. (E.g., Christian v. Allee (1902), 104 Ill. App. 177, 188.) In addition, courts have held that liens should be defeated on the basis of constructive fraud where a lien claimant knowingly files a lien containing a substantial overcharge. Lohmann Golf Designs, Inc. v. Keisler (1994), 260 Ill. App. 3d 886, 632 N.E.2d 121, 198 Ill. Dec. 62; Fedco Electric Co., Inc. v. Stunkel (1979), 77 Ill. App. 3d 48, 395 N.E.2d 1116, 32 Ill. Dec. 735.

In Lohman, a subcontractor who was owed $145,568 filed individual liens on three separate, contiguous parcels of land. Each lien listed $145,568 as the amount owed, which created the impression that the subcontractor was owed a total of over $400,000. The Lohmann court held that the subcontractor's conduct amounted to constructive fraud because the lien claims overstated the amount actually due. ( Lohmann, 260 Ill. App. 3d at 892, 632 N.E.2d at 126.) The court stated that "a claimant who knowingly files a false statement regarding a material matter should not be allowed to recover because the effect of his actions is to give the appearance of a greater encumbrance on the property than that to which he is entitled." Lohmann, 260 Ill. App. 3d at 891-92, 632 N.E.2d at 125.

The Lohmann decision puts contractors on notice that they must exercise their rights under the Mechanics Lien Act in a manner that does not diminish the integrity and accuracy of land records. Inland failed to uphold its responsibility in this regard. For each parcel in the Carillon subdivision, Inland filed at least two separate liens based on different contracts and different work completion dates. Interested persons inspecting the land records for a particular parcel would mistakenly conclude that the parcel was encumbered not once, but twice, and for an amount substantially greater than Inland was actually owed. The misrepresentation Inland created has the same effect to the one created by the lien claimant in Lohmann. Accordingly, the trial court did not err by dismissing Inland's lien claims on the basis of constructive fraud.

Finally, Inland relies on Federal Savings and Loan Insurance Corp. v. American National Bank & Trust Co. of Chicago (1983), 115 Ill. App. 3d 426, 450 N.E.2d 820, 71 Ill. Dec. 132, to support its contention that Illinois courts allow multiple lien filings for the same work. We disagree. Federal Savings & Loan Insurance Corp. permits the filing of amended liens, not multiple liens that grossly overstate the amount the claimant is actually owed. Therefore, Federal Savings & Loan Insurance Corp. has no application to this case.

For the foregoing reasons, we hold that lien claims should be defeated on the basis of constructive fraud where a lien claimant files multiple liens that create the appearance of an encumbrance on the property which is substantially greater than the amount the claimant is owed. Accordingly, the judgment of the Circuit Court of Will County is affirmed.

Affirmed.

HOLDRIDGE and SLATER, JJ. concur.

19951128

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